Report card for the parties in opposition

Sli Eile: Over recent weeks I assessed the various economic proposals of some political parties – see previous posts on this site for Fine Gael, Labour and Sinn Féin. The choice of parties is to do with their current status as parties enjoying the liberty of opposition. As for the three two Government parties – we know where they stand on strategy from day to day. Just read the newspapers.

So, where do the three opposition parties stand on the economy? What they currently say and what they might do in a future Government are not the same – clearly. But, for now lets assume that what they say is what they will attempt to apply in policy if they find themselves in Government. The ‘report card’ suggested in my post of 1 April was based on four core principles:

Fairness and equity (do the proposals effectively address inequality and advance a redistribution of income and opportunities towards the less well-off)?

Public, social and community infrastructure (do the proposals provide an adequate basis for delivering vital social services)?

Sustainable economic growth and competitiveness (do the proposals represent a sensible strategy to position Ireland for the inevitable upswing - eventually)?

Public finances (do the proposals address the need to re-structure taxation and improve the effectiveness of public spending in meeting key economic and social goals)?

1 Fairness and Equity

Of the three parties, Fine Gael seem to be by far the slowest to raise taxes on the very wealthy (remember controversies about capital taxes in the 1970s and 1980s). Labour is coy about how much tax it would raise and from whom. The bulk of fiscal adjustments would come from tax increases – capital, tax relief reductions, carbon taxes, excise taxes, higher top tax rate and targetting of tax exiles. Sinn Féin takes a similar approach. However, none of these parties have called for a reduction in social welfare payments.

2 Public, social and community infrastructure

All three parties emerge as strong supporters of investment in public infrastructure. Fine Gael seems to have put in the most work in costing it and has made some interesting proposals in regard to green technology and the use of a new State Holding Company for infrastructural investment. All three parties are sitting on the question of bank nationalisation. However, events may overtake them before they have a clear policy line. Interestingly, FG, LP and SF each in their own way favour the establishment of some type of public credit institution to compete in the market place.

3 Sustainable economic growth and competitiveness

All parties focus on supply-side adjustments including investment in education including school buildings. Fine Gael want reductions in public sector numbers and wage restraint. All parties agree on the need for a generous economic stimulus. So, on paper at least, the opposition is Keynesian.

4 Public finances

A key issue, here, is a long-term commitment to tax reform, and along with it reform of local democracy and reform of public service. Labour and Fine Gael say that they are clearly committed to public sector reform.

Leaving aside issues to do with Europe and the national question (which of course can’t be done in the real world) – where is Labour on the ideological plane vis-à-vis FG and SF? Much closer to SF, it would seem, than FG. However, for now, LP is ruling out a left alliance before an election and is not contemplating getting into bed with FF after any general election (which theoretically is not to say they wouldn’t if it were the only bed available). Where does that leave Labour? Back to the 1980s?

The road to recovery: different responses

There has been, recently, a plethora of reports on the economy in Ireland ranging from the Government publication 'Building Ireland's Smart Economy' (December 2008), to various analyses by research, social partnership and advocacy bodies, to policy responses by various political parties (e.g. Fine Gael and Sinn Féin). It is hoped, over coming the weeks, to review and compare these recent contributions from the standpoint of four pillars

Fairness and equity (do the proposals effectively address inequality and advance a redistribution of income and opportunities towards the less well-off)?

Public, social and community infrastructure (do the proposals provide an adequate basis for delivering vital social services)?

Sustainable economic growth and competitiveness (do the proposals represent a sensible strategy to position Ireland for the inevitable upswing - eventually)?

Public finances (do the proposals address the need to re-structure taxation and improve the effectiveness of public spending in meeting key economic and social goals)?

Beginning with 'Getting Ireland back to work - Time for Action' published by Sinn Féin in March 2009, I will be looking at other documents in the course of the coming weeks, attempting to identify:

Points of commonality among various 'progressive' platforms

Points of difference among them

Questions and issues that appear to be inadequately addressed across all such contributions

Options for taking particular issues or proposals further

'Getting Ireland back to work - Time for action' is one of the latest contributions arguing - among other things - for a domestic stimulus with a particular focus on public capital spending in key areas of social need, incentives for small, medium sized indigenous industry and an all-island perspective in addressing economic and social challenges. The plan places considerable emphasis on the role of education and training in upskilling those at risk of losing jobs or currently unemployed as well as investment in research and development. Interestingly, the document has relatively little to say about the crisis in banking and finance. It does, however, call for the establishment of a State Bank that would ensure access by small businesses to credit. In this regard it cites the example of the Industrial Credit Corporation (before it was privatised) which proactively sought to avoid company closures and job losses through seeking out firms at risk.

Sinn Féin has very much gone with a Keynesian-style stimulus package. This is all the rage now on the left and in such recent converts such as the new US Administration. The European response, by and large, is sceptical and the Irish Government is listening to too many economists who say 'no point - we are a small open economy - it would dissipate in additional imports with minimal impact on jobs and income here - the problem of public finances is too critical anyway to allow any such largesse'. Sinn Féin disagree on this. They call for sustained and possibly higher levels of capital funding in areas such as schools, housing, ICT (including broadband).

The document also critiques the lack of evaluation of effectiveness in public spending in support of enterprises (page 8). A distinguishing feature of the document is the way in which it places indigenous industry at the centre of any national economic revival. While it accepts the benefits of Foreign Direct Investment (the records do not show that Sinn Féin urged any raising of the nominal 12.5% Corporate Tax rate during their 2007 election campaign), it invokes the Telesis Report of 1982 in arguing for the establishment of strong indigenous (and presumably multi-national) industries.

As further posts will show most of the ideas advanced by Sinn Féin are held by other progressive voices. Some specific policies appear to be unique such as the creation of a State Bank with a specific focus on aiding small and medium-sized businesses. In all the document, provides a valuable set of ideas and proposals which, if acted on, could position Ireland well to avoid the worse excesses of slash-and-burn economics during these trying times and at the same time anticipate how the island could compete on the basis of knowledge, innovation and skills in the next phase of our economic development. If Whitaker and Lemass got it right on the need to open the country to trade as well as foreign direct investment in the 1960s, then a new paradigm is called for as we head into the next decade. Citing Finbarr Bradley and James Kennelly 'Capitalising on culture, competing on difference' the document calls for a 'radical rethink of higher education' and a move away from an 'industrial mindset' to a situation where graduates are flexible, self-starting and multi-skilled.

One suspects that a key to recovery is not just 'more education' but a very different kind of education. Interestingly, Sinn Féin also make the case for investment in early childhood education (we have not heard too much about that in recent times) to 'train workers now for a pre-school education system' and to 'start constructing the buildings required' (page 16). Perhaps the €2 billion earmarked for the building of public offices under 'de-centralisation' could be used for that? It pays dividends, as economist James Heckman points out.

In a telling sentence on page 5, the document says: "Initiatives like the 'Ideas Campaign' website are to be lauded, and show the tenacity, creativity and resourcefulness of the Irish people when put to the test - but we need government leadership, as well as people-led ideas"